A new Carroll Gardens homeless shelter built on old relationships

A year ago, after the loss of state funding, the Bloomberg administration ended its signature initiative to combat homelessness, a rent subsidy program called Advantage.

The policy change has been predictably devastating to the people who relied on the program, and who have since crowded into an already overburdened shelter system.

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At a Sept. 18 hearing, City Councilman Brad Lander—an affordable housing expert—sharply criticized the city’s Department of Homeless Services, later telling The Wall Street Journal: “There was nothing new offered to confront a big crisis.”

D.H.S. claimed it had a plan to deal with the space crunch, though. Last week, Lander learned about part of it: a 170-bed homeless shelter, which could open within weeks, right in his district.

This facility, one of several to spark NIMBYish reactions in affluent neighborhoods in recent months, is being considered by city officials under conditions of strict secrecy.

And based on the scant documentary record, this particular one looks like something of an inside job, as D.H.S. prepares to award a no-bid contract worth millions of dollars to the agency's recently departed commissioner, who appears, in turn, to be renting the building that will house the shelter from one of his newly established nonprofit's own board members.

THE PROPOSED FACILITY, AT 165 WEST 9TH STREET, IS AT THE SOUTHERN end of Carroll Gardens, around the corner from a Mexican slow-food restaurant, a wine store and several expensive condo buildings. The disclosure of the plans has sparked both predictable hand-wringing about crime and vagrancy, and—this being Brooklyn—an earnest anti-NIBMY backlash. (“I am overjoyed,” one poster wrote on the BoCoCa Parents message board, “at the possibility that 160-170 individuals will have a warm place to sleep.”)

Lander, however, is concerned—both about the substance of the proposal, which has yet to be publicly revealed, and the opacity of the city’s approval process.

“Every important element of oversight or input is missing,” Lander told me.

The neighborhood first learned of the potential plans on Oct. 4, via a terse one-page letter from Aguila Incorporated, a nonprofit that operates more than two dozen homeless shelters around the city via contracts with the D.H.S. The notification left many questions unanswered; for instance, how is the bidder planning to fit 170 people—single men, apparently—into the structure, a vacant 10-unit apartment building?

When I contacted Heather Janik, a D.H.S. spokeswoman, she said that the agency would not reveal further details.

“We don’t discuss the nature of proposals when they’re in the procurement process,” she said.

In other words, the city will not discuss what it’s considering until the decision is made—and according to Lander, that could happen very quickly.

The city “has decided to proceed with this proposal under ‘emergency contract’ rules, which only require 30 days community notice,” the councilman said in an email.

Janik refused to confirm this, but in the homeless advocacy community, the assumption is that the facility will be open for the winter—meaning the first residents may arrive within weeks.

The move is part of a wider Bloomberg administration push to disperse homeless shelters out of impoverished neighborhoods, in keeping with the city’s “fair share” regulations—rules that, ironically, Lander has loudly advocated. Similar debates have erupted in Chelsea, Greenpoint and the Upper West Side, but under the emergency procedures, public opposition has mostly been limited to post-facto griping.

Lander stresses that he is sympathetic to the city’s needs, and not opposed on principle to the idea of homeless services in his district.

“They need a lot more shelter beds,” he said.

Some 46,000 New Yorkers—including 19,000 children—now depend on the system, an increase of almost 25 percent since last year.

As demand for space has risen, the crisis has created some unusual opportunities for landlords to profit by packing poor people into their buildings. At a controversial shelter on 95th Street on the Upper West Side, for example, the city is paying $3,300 a month per unit, including services—more than the current median rent for market-rate apartments in Manhattan. That shelter is also operated by Aguila, which appears to be one of the most aggressive players in this lucrative low-end real estate market.

Aguila, founded in 2001, has a checkered history. For years, it was run by the son of former Bronx assemblyman Peter Rivera, a Democratic machine politician with a history of allegedly steering contracts to nonprofits run by his associates. (The Daily News and Village Voicethoroughly investigated the allegations, which led to a corruption indictment against one of Rivera’s friends, though not the assemblyman himself, who has since been appointed to head the state Department of Labor by Governor Andrew Cuomo.)

Last year, Comptroller John Liu accused Aguila of over-billing the city by nearly a million dollars for its services. D.H.S. claimed its internal figures showed a discrepancy of only $542, and Janik said the nonprofit is now operating under new management.

Janik should know, because Aguila’s new boss is her department’s old one: former D.H.S. commissioner Robert Hess. Since leaving government service in 2010, after four years in the Bloomberg Administration, Hess has followed a well-trodden path into public contracting, starting an organization called Housing Solutions USA in July of 2011. It has since merged with Aguila, and Rivera’s son—also named Peter—is no longer listed as the executive director of the nonprofit.

Aguila operates the shelters under four city contracts, according to to Janik, two of which were awarded since Hess took control of the merged entity.*

Janik would not comment on the cost of the Carroll Gardens project, but a considerably smaller—100-bed—contract for a Bronx facility came with an attached price of $21 million, according to the Post.

Neither Hess nor a publicity contact for Housing Solutions USA, Jennifer Lim, would comment about the Carroll Gardens proposal, referring all questions to D.H.S. When asked via email for a copy of Housing Solutions USA’s most recent tax return—which nonprofits are required by federal law to make available for public inspection—Hess replied to me, mistakenly thinking he was writing to his colleague Lim:

“Jen, tell him again that all requests need to be made through DHS,” Hess wrote. “Nothing more.”

Lim later wrote to say that since it was only 15 months old, Housing Solutions USA has yet to file a tax return. Such documents typically disclose a nonprofit’s revenues and expenses, as well as the identities and compensation of executives and board members.

Advocates for the homeless say Hess has maintained a decent reputation, despite presiding over a turbulent period at D.H.S. That has done little to ease the concerns of Lander and others about the prospect of overcrowded conditions in the seven-story apartment building, which has its own troubled history.

Originally designed as luxury condos by the notorious architect Robert Scarano, the project languished for nearly a decade, reportedly due to issues with the Buildings Department, which has since banned Scarano from filing permits due to alleged malfeasance. A certificate of occupancy was finally issued for the building in 2010, even as the surrounding stretch of Court Street filled with bakeries and bistros, driving up rents and sale prices.

Still, apartments in the area tend to rent in the $2,000-a-month range. Though DHS would not comment on leasing arrangements, if the arrangement provides anything close to the rent in the Upper West Side deal, the building's landlord could end up profiting handsomely from his white elephant.

The building is registered to a company called Tunnel Condos LLC. The deed shows that the company is associated with a real estate attorney named Charles Wertman, who, as it happens, is listed on the Housing Solutions website as member of the nonprofit’s board.

Wertman, who goes by the nickname "Chesky" according to his profile on Linkedin, is the general counsel for Amsterdam Hospitality, a Manhattan-based boutique hotel chain. He did not respond to voicemail or an email message sent to his work account.

Janik and Hess declined to comment on whether Wertman stood to profit personally from the no-bid contract.

When I asked Janik about the propriety of D.H.S.’s relationship with Hess—which has come under criticism from elected officials opposing the similarly expedited Upper West Side homeless shelter—she bristled.

“He has followed all proper procedures with the conflict of interest board to be cleared to do business with the city and has 30-plus years of experience in the field of homeless services,” Janik said.

A community meeting to discuss the project is scheduled for October 24, and Janik said that D.H.S. had no timetable for the approval process.

“I don’t know if it will be months after the public meeting, I don’t know if it will be soon after the public meeting,” she said.

The event is just for show, however. The process is designed to limit the public’s power, for obvious practical reasons: few neighborhoods would welcome a homeless shelter if they had any say in the matter. Even in liberal Carroll Gardens, fretful residents are raising questions about property values and safety, forwarding alarmist news articles about a similar shelter in Queens, which houses a substantial number of sex offenders. (D.H.S. says it is legally obliged to offer shelter to all needy citizens, regardless of criminal records.)

Several knowledgeable sources said that swift approval of the shelter is a forgone conclusion.

On Friday evening, the long-darkened building was suddenly lit up, and conversion work was apparently underway—though no work permits have been filed with the Buildings Department. Looking for a foreman, I opened the building’s front door, glimpsing a lobby full of construction debris. The front hallway was full of haphazardly stacked cardboard boxes: bunk beds, ready to be assembled.

*This line has been updated from the original article to reflect the fact that after publication, Janik amended the information she provided about the number of contracts awarded to by the city to Aguila after Hess joined the company. She had initially said that all four contracts of Aguila's contracts with the city were awarded after the company came under new leadership.